PROTEST DISNEY OVITZ PACKAGE, ADVISER SAYS.

Byline: Daily News Staff and Wire Services

Walt Disney Co. shareholders should withhold their support for the entertainment giant's board at its annual meeting this month to protest the $130 million severance package for departed President Michael Ovitz, a shareholder consultant said.

Withholding votes for the five directors up for election at the Feb. 25 meeting in Anaheim is ``the best method of sending a message to the company about its compensation practices,'' said a report published by Institutional Shareholder Services, which advises about 30 percent of institutional investors with assets over $2 billion on how to vote their proxies.

Ovitz, who joined Disney in late 1995, left two months ago with $38.9 million in cash and options worth about $90 million. The options enable Ovitz to buy 3 million shares at a price of $57 a share in 1-million-share annual increments starting Sept. 30, 1998. Stock of Disney was up 12.5 cents to $72.75 a share Wednesday.

Burbank-based Disney and Chairman Michael Eisner have been hit with a shareholder suit in Delaware over the Ovitz package and have asked for a dismissal, saying Ovitz's compensation was in line with that paid to other sought-after executives.

Despite its recommendation on withholding support of the Disney board over the Ovitz severance package, ISS did not tell stockholders to vote against two other cash bonus plans on Disney's proxy. And the firm advised them to vote against a shareholder proposal to create a review of executive compensation and decide whether a cap should be placed on executive pay.

Bethesda, Md.-based ISS said it approved of the cash bonus plans because they're tied to performance and because Ovitz is not a participant in either plan. It said the company's pay packages are adequately disclosed in the proxy and that a cap on pay isn't appropriate because the board should be given discretion over how much executives are paid.

Disney disclosed last month that it had extended Eisner's contract for 10 years with a base salary of $750,000 annually, bonuses tied to gains in earnings and stock options worth an estimated $195 million. Analysts have endorsed the pact because it ties most of Eisner's compensation to Disney's financial performance.